HCLTech, the third largest information technology (IT) services player in India, reported a net profit of Rs 3,983 crore for the fourth quarter (Q4) ended March 31, 2023. This was up 10.8 per cent year-on-year (YoY). Sequentially, profit was down 2.8 per cent.
Revenue for the quarter grew 17.7 per cent YoY at Rs 26,606 crore, although revenue growth was flat sequentially. After the disappointing results from the country’s two largest players — Tata Consultancy Services (TCS) and Infosys — HCLTech managed to defy the odds.
According to Bloomberg estimates, the company’s net profit was beat but missed the revenue estimate. Bloomberg had expected net profit to be at Rs 3,877 crore, and revenue to be at Rs 26,823 crore.
The company guided for a revenue growth range of 6-8 per cent in constant currency (CC). It expects its services revenue growth to be in the range of 6.5-8.5 per cent in CC terms. The growth expectation is much lower than what the company clocked in 2022-23 (FY23).
“FY23 has been a great year. The overall revenue came in pretty much at the midpoint of our guided revenue. The growth is attributed to good momentum in our services and business across segments, sectors, and geographies. We crossed Rs 1 trillion in revenue,” said C Vijayakumar, chief executive officer and managing director, HCLTech.
Vijayakumar also attributed the quarter’s better performance to the company’s exposure to small and regional banks in the US being less than 1 per cent. He, however, said that the telecommunication and technology verticals would see pressure.
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“2023-24 (FY24) will be the year of consolidation on both supply and demand side,” he added.
HCLTech also declared an interim dividend of Rs 18 per equity share on Thursday. This would be the first dividend for FY24.
For the full year, the company reported revenue of Rs 1.01 trillion, up 18.5 per cent (up 13.7 per cent CC). Net profit grew 10 per cent at Rs 14,851 crore. HCLTech’s services revenue grew 15.8 per cent in CC terms.
“HCLTech guided for FY24 estimated CC US dollar sales growth guidance of 6-8 per cent. This is better than our expectation, considering Infosys’ guidance of 4-7 per cent. The management stated that booking delays and deal ramp-ups are only in the discretionary space, while cost optimisation and transformation initiatives in others continue. Deal bookings are showing slight moderation, while client additions stayed strong during Q4. Net headcount addition improved with decent fresher addition. The stock offers reasonable risk/reward for investment. We have a ‘buy’ rating on the stock,” said Sanjeev Hota, head-research, Sharekhan by BNP Paribas.
HCLTech reported a new total contract value (TCV) worth $2.07 billion, down 8 per cent during the quarter that ended March 2021-22. The company said the drop in TCV is due to the seasonal weakness of the quarter. During the quarter, the company won 13 large deals — 10 in services and three in software.
After the Infosys shocker, analysts expected HCLTech to spring a nasty surprise, but it managed to put on a better show.
Veer Trivedi, research analyst, SAMCO Securities, said in a note that the result has not been a shocker like its leading IT peers and thus, the Street will be appreciative of this.
“After two major misses in TCS and Infosys, the Street was expecting another disappointment from HCLTech. The company, however, surprised pleasantly us as the Q4 results came out in line with expectations. There was a mild miss in revenue. However, the profits came out a little better than expected, aided by growth in other income. Overall, its revenue was down 0.3 per cent quarter-on-quarter (QoQ). However, its services business grew 0.6 per cent QoQ. The guidance of 6-8 per cent in CC for FY24 is good and so is the margin guidance of 18-19 per cent,” he added.
HCLTech also performed better than peers in terms of employee additions. For Q4, the company added 4,480 freshers. The company said it would make good on all offers made. Compared to the soft hiring of 841 by TCS and Infosys’ net reduction of 3,611 for the quarter, HCLTech’s net attrition came down to 19.5 per cent.
Segment-wise, revenue from services was up 11 per cent YoY in CC terms. Meanwhile, revenue from the software business saw growth of 8.2 per cent and digital revenue up 17 per cent.